The Human Connection
One of the most fundamental mistakes in forming strategic partnerships generally occurs at the very beginning of the process. In fact, it often occurs before any serious discussions have taken place between two potential partners. And, should this mistake persist, it will seriously reduce the possibilities that any partnership formed will be productive let alone successful.
The mistake that I’m referring to rests on the assumption that a strategic partnership is fundamentally an agreement between two or more companies. I recognize that there is a reasoned, and mostly self-serving, tendency for lawyers and politicians to contend that corporations are “people”. But, at least in the case of the formation of successful strategic partnership, it is far more productive to see corporations as inhuman legal entities that are populated by human being. Successful strategic partnerships rest on a solid foundation of the relationships amongst people who are acting as representatives of the corporations involved.
People do business with people they know, like and trust. Nobody can know, like and trust a legal entity. (Unless, of course, you are either a lawyer or someone hiding behind the shield that a Corporation provides.) Successful strategic partnerships are invariably human to human connections. The strength and depth of such relationships are the bedrock upon which a successful strategic partnership can be founded.
All of this leads me to my first recommendation. It is essential that the individuals who are going to structure and manage the strategic partner get to know each other well before they undertake discussions about the partnership and how it will operate. The core question is, “how can you believe in the commitments made by a corporation if you don’t have a solid basis for trusting the people who are representing it?”
The Master Strategic Partnership Agreement
A second major mistake that is often made is to begin focusing on specific projects rather than the overall structure and operation of the partnership. My experience has been that it is better to begin by focusing on developing a master agreement. Think of it in terms of building a house. You wouldn’t put the interior walls and furnishings in place before you finish the roof. Having a plan in place for managing the strategic partnership at the top level is something like having a tight and weatherproof roof in place before you get into the messy details of specific projects, responsibilities, accountability and the like. Here is a short list of some of the areas that I recommend focusing on:
- A clear statement of the purpose of the strategic partnership
- A general agreement on how contributed intellectual property will be handled
- A general outline of how revenue and other benefits will be distributed
- A structure for working together including a schedule for regular meetings, monitoring of progress, generation of reports
- Guidelines for accounting for expenses and investment
- Guidelines for establishing role definitions and team members for each specific project
- A process for agreeing on, and accounting for, efforts such as business development and sales
One of the reasons that I have found the master partnership agreement such a useful place to start is that it constitutes “dating before marriage”. If the parties can’t work out the details at this level, there is little hope that they can handle the far more complex process involving individual projects and joint undertakings. The master agreement need not be complex nor extensive but it is a chance for both sides to evidence goodwill, a willingness to compromise and a commitment to work together to make the strategic partnership work. Here is an outline of a strategic partnership master agreement that I have found useful:
- Parties: This section describes who the parties will be in the strategic partnership. It names the organizations, the leadership of each organization with their address.
- Description: This section gives a general overview or description of the venture, program, and the kind of projects that that will be undertaken. It should also include information on the rationale, mission, history or other background information.
- Goals: This section should describe the goals of the Partnership. It should be specific with any number targets and what will be accomplished for the clients through the strategic partnership.
- Partner Responsibilities: The agreement should describe the roles, responsibilities, performance metrics and expectations in a way and at such a level of detail that both parties understand clearly what will be expected of them. Items covered in this section might include project oversight, supervision and review, reporting, service delivery, finance, equipment and facilities, personnel assignments, management, communication, marketing, etc. This is often the most detailed section of the agreement.
- Management: Overall management should be described here with information on how the Partnership will be managed, what governing body is responsible and how management will communicate with each member of the Partnership. Reporting responsibilities should also be described here.
- Accounting: The Partnership should maintain a separate accounting system with one member or another (or a committee) maintaining a set of records. All financial information to be kept and maintained should be described here. Any financial policies or procedures should also be described here.
- Insurance Coverage: The Partnership may or may not need insurance coverage for a variety of reasons. Any insurance coverage should be described here.
- Communication, Reporting and Oversight: Ongoing communication is important to a successful strategic partnership. Expectations and protocols for communication, meetings, reports, design and/or problem solving sessions should be described here so that all parties understand what is expected.
- Duration: This section sets a timeline for the Partnership. It should describe a beginning and end date or an annual process for review.
- Termination: Describe how the master agreement can be terminated. It would include notice and other expectations upon serving notice to terminate the contract early.
- Severability: Standard contact law – preserves the agreement if one provision is found faulty rather than invalidating the entire agreement.
- Amendments: Describe the process for amending or changing the Agreement so that all are clear. It should also deal with the question of a mediation process should it be needed.
- Governing Law: Statement that is governed under the laws of the state that venture is operated in or alliance members reside.
- Assignment: This includes statement that members cannot assign their rights to another organization or substitute another party in their place.
As you can see, the master agreement does not have to be a very complex document. But it is a good first test. If the parties can’t agree at this level, how are they going to get along when things get more complex? The master agreement is also a likely early success in the creation of a mutually beneficial strategic partnership. It gives the people something to celebrate early in the process and provides evidence of the commitment of the other side to work together collaboratively.
© Earl R. Smith II, PhD
I provide mentoring to those who have both the courage and determination to make a truly transformational journey. My approach is heavily influenced by core principles of Zen Buddhism. I also provide advisory services to CEO and senior teams – particularly mid-market companies. I don’t offer quick fixes or follow the latest fads. If you are willing to make the long journey – if it’s time for you to come to know the person you really are and the path you should be following – if you want to start living life you were truly meant to live – then perhaps we should talk. Send me an e-mail and we can arrange a time to chat.
 One of the most common objections to this statement is that strategic partnerships are built upon opportunistic undertakings that happen to overlap. This is putting the cart before the horse. Common business interests are surely an essential part of any successful strategic partnership but it is the relationships amongst the people involved in managing them that keeps things going forward and on an even keel when things get rough. An old friend and mentor was fond of observing that, “Partnerships based upon common business interests have all the substance of a hooker’s smile. Both tend to fade when the money thins out. And both will certainly completely disappear if a John shows up with more money in his pocket.”